Printed on: December 06, 2012
Fulfilling a vital role
Changes in tax code could have an adverse impact on your local nonprofit agencies, writes Ron Gill.
Now that it is getting close to the end of the year, it is time to start thinking about charitable donations. There are some potential changes coming in regards to deductions for charitable donations due to the fiscal cliff (sequestration) and changes in tax policy our country is facing.
There have been proposed changes in the charitable donation deduction that have included outright elimination to capping the amount that you can claim for all deductions. This could have a big impact on our community through services provided by nonprofit organizations.
Some people consider the tax deduction when making a donation. However, Winston Churchill once said that "We make a living by what we get, but we make a life by what we give." If you do consider the tax deduction when making the donation, now is the time to consider the donation while it is still in place.
The Wall Street Journal recently estimated that the average taxpayer has deductions for state and local taxes at $11,593 and mortgage interest at $10,640. A cap on deductions would leave little or no room for a deduction for charitable donations or health care costs.
The National Council for Nonprofits performed a survey and found that 30 percent of individuals would reduce their giving if the tax incentive is removed. Of those individuals, 62 percent would significantly reduce their charitable donations.
As the long and sluggish economic recovery continues, more and more individuals are seeking help from the local nonprofits as their savings are depleted. Many nonprofit organizations are seeing that their revenues generated by donations are slowly dwindling. With donations decreasing a growing need for help, many are going without.
The fiscal cliff (sequestration), with cuts to government programs for those in need will increase the amount of individuals seeking help at local nonprofits. Most states, Idaho included, have already reduced services to those in need over the past four years due to the poor economy and decreased tax revenues.
Many nonprofit organizations perform work for those in need on a contract basis for government agencies at a reduced cost than what could be provided by those agencies. The across-the-board cuts proposed in sequestration (fiscal cliff) will force the nonprofits to do more with less or stop providing certain services. The nonprofit sector employs 10 percent of the nation's workforce, according to the Congressional Research Service.
Nonprofits perform many services that allow working individuals some flexibility in their daily lives and rely less on the government. With fewer donations, less government support and potentially less individuals working at nonprofits due to budget cuts from sequestration, these nonprofit organizations that many depend upon for that flexibility in life may not be there when needed.
Gill is an engineer who works for the federal government and can be contacted at mud email@example.com.